Acco 111

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question (3 pts each).

____ 1. In periods of rising prices, the inventory valuation procedure that results in the highest net income is
a.|the lower of cost or market method.|c.|the average cost method.|
b.|the LIFO method.|d.|the FIFO method.|


____ 2. In periods of rising prices, theinventory valuation procedure that results in the highest ending inventory is
a.|the lower of cost or market method.|c.|the average cost method.|
b.|the LIFO method.|d.|the FIFO method.|


____ 3. In periods of rising prices, the inventory valuation procedure that results in the lowest gross profit is
a.|the lower of cost or market method.|c.|the average cost method.|
b.|the LIFOmethod.|d.|the FIFO method.|


____ 4. In periods of rising prices, the inventory valuation procedure that results in the lowest cost of goods sold is
a.|the lower of cost or market method.|c.|the average cost method.|
b.|the LIFO method.|d.|the FIFO method.|


____ 5. In periods of rising prices, the inventory valuation procedure that results in the lowest tax savings is
a.|the lower of cost ormarket method.|c.|the average cost method.|
b.|the LIFO method.|d.|the FIFO method.|


____ 6. A firm that sells a single product had a beginning inventory of $4,000 units with a total cost of $24,000. Early in the year, 10,000 units were purchased at $8 each. Using FIFO, what is the value of the ending inventory of 3,000 units?
a.|$24,000.|c.|$18,000.|
b.|$21,000.|d.|$32,000.|


____ 7.Given the following data, calculate the cost of ending inventory using the LIFO costing method.
1/1 Beginning inventory 45 units at $10 per unit
2/25 Purchases 40 units at $12 per unit
6/15 Purchases 30 units at $13 per unit
9/20 Purchases 25 units at $14 per unit

12/31 Ending inventory 40 units

a.|$560|c.|$480|
b.|$400|d.|$545|

____ 8. Given the following data, calculate thecost of ending inventory using the FIFO costing method.
1/1 Beginning inventory 45 units at $10 per unit
2/25 Purchases 40 units at $12 per unit
6/15 Purchases 30 units at $13 per unit
9/20 Purchases 25 units at $14 per unit

12/31 Ending inventory 40 units

a.|$560|c.|$480|
b.|$400|d.|$545|

____ 9. A firm that sells a single product had a beginning inventory of 4,000 units with atotal cost of $12,000. Early in the year, 8,000 units were purchased at $5 each. Using LIFO, what is the value of the ending inventory of 2,000 units?
a.|$10,000.|c.|$6,000.|
b.|$8,000.|d.|$20,000.|

____ 10. The gross profit method of determining ending inventory cost
a.|can be used without taking a physical count of merchandise.|
b.|provides accurate information about the number of units ininventory.|
c.|requires that a firm keep inventory and purchases data at retail value as well as at cost.|
d.|requires that the inventory be classified into groups of items of about the same rate of markon.|

____ 11. The accountant for a company whose inventory was destroyed by fire determined from undamaged records that the cost of goods available for sale was $100,000 and the net saleswere $75,000 up to the date of the fire. The accountant also determined that the company's normal gross profit rate is 40 percent of net sales. From this data, the accountant estimated the cost of the inventory destroyed by the fire to be
a.|$60,000.|c.|$30,000.|
b.|$55,000.|d.|$25,000.|

____ 12. The weighted average cost of an inventory item is calculated by
a.|dividing the sum of the unitcost on the purchase invoices by the number of units purchased.|
b.|dividing the cost of goods available for sale by the number of units on the ending inventory.|
c.|dividing the cost of goods available for sale by the number of units available during the period.|
d.|dividing the cost of goods sold by the number of units available during the period.|

____ 13. The modifying convention of...